today on "face the nation." with the country set to fall off the fiscal cliff in just hours, time is running out for congress to make a deal. and what a difference a day makes. on thursday, things looked bleak. >> speaker boehner is unwilling to negotiate we have not heard a word from leader mcconnell. nothing is happening. >> we wanted an agreement, but we had no takers. >> o'donnell: it took a trip to the white house and a package scolding from the president. >> the american people are watching what we do here. obviously, their patience is already thin. this is deja vu all over again. >> o'donnell: but by week's end, senate leaders agreed to make a last-ditch effort to get a deal. >> so i'm hopeful and optimistic. >> i'm going to do everything i

can. i'm confident senator mcconnell will do the same. >> o'donnell: we'll have the latest on what that agreement might look like but will it actually do anything to cut the deficit? and what happens nay don't get a deal? we'll hear from two senators who have been working together on deficit reduction, assistant majority leader dick durbin of illinois, and senator tom coburn of oklahoma. then we'll look forward to 2013 with an all-star panel include peggy noonan of the "wall street journal." dee dee myers of "vanity fair." "time" magazine's executive editor michae michael duffy, and also "time" columnist joe klein. and we'll hear from major garrett and nancy cordes. >> you going to get a deal today, sir? >> hope so. >> o'donnell: it's all ahead because this is "face the nation." captioning sponsored by cbs from cbs news in washington,

"face the nation" with bob schieffer. substituting for bob schieffer, cohost of "cbs this morning," norah o'donnell. >> o'donnell: good morning, again. tom coburn and dick durbin are here, and we'll turn to both of you in just a moment. but we want to start with some new information from chief white house correspondent major garrett and congressional correspondent nancy cordes who are here. i know you have both been speaking with your sources this morning, and, nancy, what's the latest? >> reporter: nora, democrats will at this point are very pessimistic that leader reed and leader mcconnell will be able to strike that deal that they were so hopeful about 24 hours ago. the two staffs worked late into the night. they trade proposals will back and forth but democrats tell us they are just still too far apart on taxes. democrats was soset the limit at $250, 000, let the tush of bush tax cuts expire for people making more than that. republicansment that limit to be higher, and they're also far

apart on estate taxes. they will meet with their caucuses later today and at that point we expect they're going to tell their members they just weren't able to make out a deal on this. >> o'donnell: major, you have been talking to the white house. >> reporter: the fiscal cliff preoccupation hab about taxes but there's another part, across-the-board cuts, and they are preparing to send out furlough noticees, and apply want quester. >> o'donnell: the white house is preparing to do that? >> reporter: it that's. because the deadline is approaching. it cannot reasonably ignore the law, and misapplying. so it is now preparing to send out a variety of notices to federal contractors, the contract is suspended or canceled. or to tell various agency the-- the t.s.a., f.a.a., all through the federal government, lay people off, this is real, because they seaport negotiations are not getting anywhere near a deal and they have to prepare for the cutting side of the fiscal cliff, not just the taxes.

>> o'donnell: and, nancy, if there is no deal, what happens next on monday? >> reporter: essentially we move to plan b, where senates democrat introduce their own plan in the senate that caps the bush tax cuts ap at $250,000 or less, extends long-term unemployment benefits, maybe imposing spending cuts to push off the sequester for six months or a year and we see if the republicans allow a straight up-or-down votes that only requires 50 senators to vote yes or if we have to go to a 60-vote threshold. democrats think they can get the seven republicans they need-- they think they might be able to get up to 10 who have signaled they could go along with something like this. that's not the end of the road. even if it passes, it has to go to the house and that's a tricky road as well. >> o'donnell: let's turn now to our senators who are here. senator durbin, you're the number two senator on the democratic side. how far apart are you with the

republicans to reach a deal? >> well, i think there still is a chasm there. there's work to be done and not much time left. it's interesting that it does come down to two very basic issues-- one is what percentage of the wealthiest people in america will pay a higher tax eat. and secondly, how many of the richest americans who pass away should be spared paying extra for estate taxes. from the republican side, those remain their highest priorities -- protecting object highest income individuals from tax increases and protect up to 6,000 estates a year from pagan additional $1 million. that's what this is about. we see it differently. what's at stake as far as we're concerned are 98% of the american families, working families and middle-income families with shouldn't see their taxes go up on january 1. that's our highest priority. als the president added, the two million who would lose unemployment benefits immediately if we don't act to change that between now and the deadline. >> o'donnell: so you say there's a chasm.

you don't think there will be a deal today? >> i won't go that far. i have been around washington long enough to know it takes a deadline, it takes a lot of get a lot of worry when people reach a point and say, "reporter, let's find a way through this." it has happened before and it could happen again. >> o'donnell: are the democratic defensemans willing to raise the threshold from 250,000 to 400,000. >> each time you raise it we add more to the deficit of what we're going to face down the road. time you decide you're going to protect the higher income americans from paying more taxes it imposes more of a burden to cut spending, reduce expenditures in medicare and other areas. becomes very problematic for a lot of working family. >> o'donnell: senator coburn, what are you hearing from your republican leader? he of has he come up with a deal? >> we haven't heard anything, just minimal in terms of what's

going back and forth. i think they're far apart. i don't think anybody knows what's going to happen. the odds are that we've not seen the leadership on either side of aisle to solve this problem, and why would we think we're going to see the leadership in the next 24 hours to solve the problem? but i would take issue with dick-- the characterization is we're the-- no matter where we raise taxes, what's going to happen to the money? we're going to grow the government with it. we're not going to reduce the deficit because we refuse to solve the bigger problems like saving medicare, insuring social security disability. we're not going to use that money to do anything except continue to grow the government. so the characterization is that we're-- what we're wanting to do is to make sure we have a dynamic economy, and i have no problems -- i've been out there for a long time with saying those that are making more ought to contribute more. but where does the money and g? and what do do you with the

money? do you do something with the money that will actually get us further down the road and fix our ultimate long-term problem, which is we're bankrupt. and we went off the cliff two years ago when we covered 90% of our debt to g.d.p. and by the way, if you look at it the way of other country, our debt to g.d.p. is 120%, not 90%, not 100%, it's 120%. one last fact it's average greek citizen debt for their country is 36,000. we're at 51,000 per person in this country. we're becoming greece, and we have a government that we're willing to pay the taxes for 65% of the cost of it. we need to change that. we need both, both-- we need to do both. >> o'donnell: i'm flawed brought thaglad you brought that up. we're not even there. we're just dealing with this little short-term patch that you

can't even get an agreement on. what does that say about what's happened here in washington and a real lack of confidence among the american people that it the body you guys serve in is just broken? >> well, it is, and it needs to change. this conservative republican, this progressive carriage we both voted for it. we worked on this for three years. there is room for compromise and agreement. here's what we ran into the problem with. 40% of deficit reduction in the sim son-bowles came from additional revenue, 40%. when we said to speaker boehner you have to come up with revenue, he said i'll come up with a plan that protects those making less than $1 million. he couldn't silent republican caucus. the only way we deal with this cries and the deficit is on a bipartisan basis. this can't be done exclusively democratic senate, exclusively republican in the house. it will never work. >> o'donnell: both of you are also part of the gang of eight air, group of senator senators

that many people look at and say these are the grown-ups in the youth senate in terms of looking real ways to reduce deficit. but with all due respect, why haven't you ever put pen to paper and put anything forward and rally people around your proposal? >> we put to paper many times and we have ideas that we think could be parent of the ultimate answer here in terms of deficit reduction. none of it is easy. i don't want to mislead you. it's not easy. we float some of the concepts and some of the ideas and they've had some tractions. want premise is, if we're going to follow simpson-bowles as a starting point we need revenue as a starting point. that has been a breakdown issue with bane and the house of representatives. until we get beyond that, perhaps beyond the cliff, we can't are an honest discussion. >> o'donnell: senator coburn, on the issue of increased revenue, downing boehner is part problem? senator reid said he's running a dictatorship? >> i don't think so at all.

the frustration in the house-- and i'm not known as a no non-conservative-- they passed a lot of things there has not been action on in the senate, and that's the majority leader's prerogative. but if you take it and bend it to the will of the senate and send it back, that's how you get compromise. to not move dismingz not ever establish the process-- i think speaker boehner has done a good job in the members he has. i think they maid mistake in not supporting plan b. we would have modified it and sent it back and then they would have had it make a decision on it. the basic fact is the government is twice the size it was 11 years ago. and nobody in washington is doing anything to fix the growth of government to where we have one that we can afford. un, we're going to have to grow at 8%, 9%, if we think we can outgrow it. that isn't going to happen. we have to do the things we have to modernize medicare.

we have to achieve real save that is won't change health care but will actually save some money. >> o'donnell: do you think there's an advantage to going over the fiscal cliff? >> i think there are a couple of advantages. therthere are a lot of disadvantages. one of the advantages is the american people will see what the real cost of their government is the actual real cost for the very wealthy, the very, very low will have minimal impact on. it's about $200 a year. for the very, very wealthy-- that's one of my criticisms of the tax cut. one of the things we did in the simpson-bowles was a reform of the tax cuts. what people don't realize is the well-connected, well-heeled in this country take most of the advantages of the all the deductions and all the giveaways in the tax code. to reform, that would redirect capital which would generate growth which would generate more revenue. unless you reform the tax code in a way that will create capital formation, you're not going to do anything.

raising taxes doesn't do that. >> o'donnell: why should there be any confidence you'll ever get this done? the idea you'll have a small fix, if you even get that here? you'll continue to have the budget battles in 2013. this won't deal with equivalent spending issues. it won't deal with entitlement reform, tax reform, all the hard issues ---- it won't even deal with the debt ceiling. you'll have to fight this again in 2013. >> the president is to this. he proposed a plan to speaker boehner for real deficit reduction and unfortunately that negotiation fell apart. tom and i believe, honest to goodness, if we come to grips with this deficit issue, come up with a responsible, bipartisan answer to it, it will not only put our fiscal house closer to being in order, it will spring this economy forward. take a look around the world. where would you invest in the world? what is the best world currency? even with all our problems it's stimulate u.s. dollar. think of what it would be if there were confidence we were

dealing with our debt, that we came to grips with it on a bipartisan basis. that will trigger the kind of growth, business creation, job creation that i think will help us ultimately resolve our deficit issues and the wealth problems we have in this country. >> o'donnell: i want to show both of you and remind our viewers a pie chart which terribly shows our federal budget and where we spend our money because i think it's important to know where the money goes, taxpayer money. and you look at it, and just about half goes to entitlements. and then you see education in green is just a small chunk of what we spend money on. and the defense is a large chunk as well. i have to ask you, senator durbin, because you have said, even in a grand bargain, that we shouldn't be tackling entitlements. how you can be serious about deficit reduction if you're not willing to take on medicare? >> norah, i tackled them with simpson-bowles. we need to taxle them again. what i said in the last few hours of the fiscal cliff don't

make program policy changes in medicare that you're going to live with decades reflect on this. yesterday 10,000 americans reached the age of 65, today another 10,000, tomorrow another 10,000, and every day for the next 18 years. these people have pied in to fair lifetime into an insurance program called social security and medicare and they are expecting the benefits they paid for. we have to resolve, as tom said, how are we going to come to grips with the growing health care costs in medicare and medicaid and still keep our promise to these people? so, yes, we need entitlement reform. let's do it in a calm, thoughtful way using something like simpson-bowles to come up with 75-year solvency. >> o'donnell: another thing, the pew economic policy group did a study this week how much it will cost to make all these tax cuts permanent again. if you did all of them, it would be $3.1 trillion over the next 10 years. it was just the tax cuts for those making under $250,000. we're looking at additional $2.3

trillion. i mean, democrats are willing to go along with those for under $250,000, and that's a big expense, or cost, or loss of revenue, however you want to look at it. how you can vote for those and not have spending cuts? >> you can't. >> o'donnell: so on monday if it gets down to plan d., what nancy called plan d., where you just have to vote to extend the tax cutes, would you vote for that? >> it depends what the deal is and what's in it. a couple of point. s. one is, we have a government that we refuse to pay for. that's number one. number two, the average couple in medicare pays in $110,000 during their lifetime of taxes and takes out $350,000. today, the people on social security in real dollars will take $21 trillion more out of social security than they paid

in, $21 trillion more than they paid in. the question is it-- it goes back to what thomas jefferson said-- never design program, never create a government program with which you have not played of laid a tax to pay for it. >> o'donnell: or a war? >> or a war. i have not vote forward one defense supplemental bill since i've been in the senate because it wasn't paid for. we didn't make hard choices. we delayed hard choices. that's what the congress is doing now. going back to your earlier point. the reason people are upset with congress and senate the senate is because we make decisions based on what is in the best interest of our politics not in the best interest of the country. and so there's this lack of trust that we will do what's in the best interest of our country, even if it hurts us politically. and that's called leadership. and we don't see much of that. and that's not a partisan statement. that's both sides. when we look at a parochial interest more important than the

interest of the nation, which is exactly the opposite of why the senate was createed in the first place, why we had a bicamera legislature. you see why we have such low esteem in voters. >> o'donnell: you both served with nebraska senator chuck hagel who has been it named for it defense. >> you cannot vote for him because of the statements he's made. >> i think he has proven his patriotism, and public service. two purple hearts in vietnam. this man deserves more than just a hearing. he deserves the respect for the service he's given our country in the and the senate and to disqualify film hear statements made-- i think he at least deserves a hearing and an opportunity. >> that's not the only reason to disqualify him. he does not have the experience to manage a very large organization like the pentagon. and we've actually had-- i think

leon pa98 has done a wonderful job. i supported his nomination. he did have a lot of experience prior to coming here. and if there's a place we need great management, it's the pentagon, and a great manager. >> o'donnell: senators coburn and durbin, good luck today. >> thank you. >> o'donnell: a busy day this sunday. >> we actually had breakfast together. >> o'donnell: i think the american people wish you luck, too, with your gang of eight. we'll be right back. for an idea. a grand idea called america. the idea that if you work hard, if you have a dream, if you work with your neighbors... you can do most anything. this led to other ideas like liberty and rock 'n' roll. to free markets,

free enterprise, and free refills. it put a man on the moon and a phone in your pocket. our country's gone through a lot over the centuries and a half. but this idea isn't fragile. when times get tough, it rallies us as one. every day, more people believe in the american idea and when they do, the dream comes true. we're grateful to be a part of it. >> o'donnell: and we're back with more from chief white house counter major garrett, and congressional correspondent nancy cordes. you just heard the two senators there. nancy, did that make you more or less optimistic about a deal today? >> reporter: it seems like they are both sort of accepting at this point are even though they don't want to preempt the pressure they don't want to say right now it looks like it's not working out, but they both

seemed pretty resigned to the fact that the most likely scenario is democrats are going to bring up their own package as early as tonight, more likely tomorrow, and then we're just going to have to see what happens. i think there was a good-faith effort on the part of the leaders to try to get this done. it wasn't all for show. but they did need to prove that they were trying to do something. and at the end of the day, it's just too difficult for republicans, most republicans to have their fingerprint on a plan that eliminates tax cuts for some people. this is just an easier way for them. >> o'donnell: what happened, major? the president did signal he was willing to go up to 400,000, possibly, as a threshold on friday then in the briefing room, he said 250,000 again, and he suggested this plan d., as nancy has outlined, on monday, where there would be an up-or-down vote. some something you think ends up happening? what will white house say about that? >> for the white house the idea of going up to $400,000 and

doing something else on federal benefits, reducing the annual cost of living adjustments to what is called the consumer price index, the president made those concessiones, two large post-reelection concessions the president made but they were the part of a much bigger deal. as the deal shrinks, the president sees it as largely a political exercise. hthe administration, all of source vitaly me, 400,000 was part of the larger deal. you get away from the desert shield, to the smaller patch arrangement where we don't talk about the debt ceiling, they're not interested in make those kinds of concessions. they would be willing to make them if there was a larger deal with greater scope and longer term implications for the federal deficit. without that, they're going to play the hard politics game and say to republicans we dare you to go over the cliff and have an

inherent, most of the political responsibility for doing so. >> o'donnell: that's interesting. i've always struggled with what is the political upside for the president to strike a short-term deal? >> well, a short-term deal only benefits the president if the understanding of the fiscal cliff is real and the consequences of it are thoroughly understood. i don't think there's a lot of evidence in the country yet that that's true. you have a couple saying it might not be such a bad idea to go over the cliff. it might concentrate the mind further. the president reluctantly send this idea, the budget control act, all the deadlinees deadlinees, as part of a long, tortuous negotiation. he now regards the negotiating process as largely a mistake and will never negotiate again on the debt ceiling. >> but the benefit for everyone, democrats and republicans of voting on something before the deadline, is that the stock market has now gone down five days in a row. we are now below 13,000. nobody knows what is going to

happen on january 2 if there's no deal. the markets might not react very much. they might take a huge hit, and no one wants to be responsible for that. >> the market cares most about the debt ceiling and defaulting. if you talk to all of the big business leaderes, the various organizations that have come to the white house and also gone to capitol hill, their largest concentration is can we resolve our long-term deficit situation and develop the some sort of peace agreement and cease-fire on defaulting on the good faith and credit of the federal government. that's not even on the table right now. i think the market reaction is going to be negative even if there is a small deal. >> o'donnell: look what will happen if a deal is not made. the bush tuctz will expire and most taxpayers will see a rate increase. if you're a couple making over $50,000, that could mean $2200 more. capital games taxes, dividend taxes, estate taxes will all go up. everyone will see a 2% cut in

your paycheck, since the payroll tax cut will expire. for every american that's about a $940 decrease in your annual takehome pay. we're talking about the child tax credit, the marital it penalty fixes, and on january 2, the stock market as you talked about, reopens, and the federal government reopens which means the sequestration kicks in. $110 billion in spending cuts a year for the next 10 years. that's a 9% cut in defense and 8% cut in domestic spending. and then we're not finished because january 7, that week, 2.1 million people will stop receiving their unemployment checks. all in all, economists say this could mean 3.4 million jobs lost and unemployment could reach 19.1% by the end of the 2013, and the u.s. will enter another recession, and yet congress can't get anything done >> there is a little bit of a cushion there. the i.r.s. didn't expect that we would get to this point. they thought congress would work

something out, so it's not as if people's paychecks are going to see higher withholdings on january 1. it's going to take a few weeks for that to kick in. so if congress doesn't work out a deal by the deadline but can figure out something shortly thereafter, there is a chance that people won't see an increase. >> o'donnell: major garrett and nancy cordes, thank you so much. and we will be right back. (all) the gulf! it doesn't matter which of our great states folks visit. mississippi, alabama, louisiana or florida, they're gonna love it. shaul, your alabama hospitality is incredible. thanks, karen. love your mississippi outdoors. i vote for your florida beaches, dawn. bill, this louisiana seafood is delicious. we're having such a great year on the gulf, we've decided to put aside our rivalry. now is the perfect time to visit anyone of our states. the beaches and waters couldn't be more beautiful. take a boat ride, go fishing or just lay in the sun.

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>> o'donnell: welcome back. joining us "time" magazine columnist joe klein and former reagan speechwriter, peggy noonan. plus forme clinton press secretary dee dee myers, a contributor to "vanity fair," and michael duffy, executive editor of "time" magazine. welcome to you all. you just heard the reporting from our two correspondents and the two senators and, joe, it sounds like-- surprise, surprise-- they haven't reached a deal yet and the idea of going over the cliff is a real one. >> yeah, but they will reach a deal. it may not be in the next 48 hours. it will be in the next couple of weeks, and we should always remember, with all of this crisis talk going on, that what's about to happen say return to the clinton tax rates of the 90s, which when they

were imposed in 19 network everybody predicted a big recession, and what we had was a big economic boom. so there are really negative aspects to going over the cliff, especially for the very poor, and there's going to be a lot more chaos in the pentagon and throughout the government because contracts, but, still, it ain't that huge, i don't think. and i think they'll get the deal done. >> o'donnell: peggy, what about that? who is sort of to blame for this? i mean, should our republican-- are republicans to blame? the president said this morning that they just can't say yes to him, that he has gone way above what he can negotiate. the democrats have been mad at him for some of the things he's been willing to negotiate on but republicans just can't say yes. >> well, i think, probably the big cliche of this moment in history is there's a lot of blame to go around. i think it covers a heck of a lot of people-- actually, a united states senator it, a

republican, said to me exactly those words the other day. i see there are two real problems. one was the unof unfortunate, sad, unsuccess of john boehner's plan b, in the house why he could not herd the cats. but other part i think is you get only one president at a time. the president is presiding here. somehow with this president, it's always cliffs. it's never deals. it's always up to the last moment. i think there is a deficit there of very broad-minded leadership, and there is certainly a deficit of trust between the congress and the president, and 20 republican in congress and the democrats. so plenty of fault to go around. >> o'donnell: dee dee, what about that? mitch mcconnell, who is really now at the heart of make something sort of deal today about how far he can take republicans, he says the president called him last week.

it was the first time he's talked to the president since november 16. why is-- is there something the president is responsible for that he's not reached out enough to republicans and established that kind of trust that there has been lacking? >> look, i would have liked to have seen the president do more reaching out during the entirety of his first term. keep in mind, the president has been negotiating with john boehner, and that was the agreed upon format. he's been in conserves with him, and when push comes to shove, boehner cannot get these deals done in his caucus. the big change is not in the white house. it's in the culture of congress. it has become increasingly partisan. increasingly polarized districts in the aftermath of redistricting. we have seen that over the decades but particularly the last decade. you have seen a real hardening on both sides. and they're not willing to meet the president on any of this. we just saw speaker boehner's

plan bfail because the republican house refused to raise taxes on anyone, and you heard both senators durbin and coburn saying they're both-- they both believe that revenue has to be part of the deal. and yet that cannot get to the house. >> o'donnell: on that note, you talked about why is washington so partisan? people ask that question. nate civilerly of the "new york times" did a study just out this week showing the makeup o of the house of representativeses in 1992, 103 members electe electeelected from swing districts, but it now there are only 35 such seats, and we have to make it through another eight years essentially of this partisanship. is that the problem? >> look at ohio, just for a minute. they had a race for congress there, like in every other state this fall, they voted about 52-47 republican-democrat for congress women and men. so you would think maybe a if i felt-50sto-up of congress,

maybe 60-40. it's 12-3, republican-democrat, because of the way both sides-- >> o'donnell: gerrymandered district. >> and john boehner controls the ohio legislature. so they all kind of reap what they've sowed here. these are almost impossible-to-defeat congressmen in their districts. so some of that is gerrymandering. but i think another thing to remember here we've just been through this sort of six-week, eight-week drill on this fiscal cliff, and most of the conversation has been about taxes and the white house has done an excellent job, by dealing with the house, and all the messaging today and the weekend about how this is about republican intransigence on taxes. we have seen that. there is as much gap 20 president and his party in congress on spending cuts as there is between john boehner and his caucus on taxes. there is great distance in how far that party has to go to come together to do the kind of entitlement cuts that we still need to see at some time,

whether this month or this year or next year. there's a long way to go. they have never been as close as people think on this topic. >> o'donnell: that's interesting, you're saying in terms of messaging the white house has done a good job in keeping this-- >> brilliant. right on taxes. on spending, every time the white house suggested a little bit of spending cuts, social security, med character immediately the democratic caucus said no. >> o'donnell: isn't that the thing about the boehner deal the president said this morning, he was willing to go father on spending cuts that made democrats mald at him and he couldn't get boehner to accept that. >> that's right. he was willing to raise the age of eligibility for medicare-- >> o'donnell: which dick durbin opposes. >> he was willing to change the way consumer price index is calculated for social security. both of those would have been nice steps. there's far more reform that has to be done to our health care system long term, and our health care system now includes

obamacare, and there are ways to mesh obamacare and medicare but we're not even beginning to talk about those ways. if you talk to tom coburn in the cordo, he'll say, "there are things we can do, but we can't do that given the state of paralysis." >> o'donnell: so would it help break the paralysis-- we're already at the point you think it would have pushed them-- 17 months now we've been looking at this scenario and they haven't gotten anything done-- granted we were in an election. would it help push the grand other and everybody seems ton the outlines of what they are if we went over the fiscal cliff? >> i think so. >> yeah. >> i don't mind it. >> i mind it. >> you mean in the air of crisis this might force action? is that what you're saying? >> also, i think the clinton tax rates of the 1990s were an appropriate level of taxation for this country. >> one of the reasons that was successful-- >> spending levels. you know what i mean. to coburn's point about, look,

whatever we do on raising taxes now will make no difference with regard to the horrible debt and deficit. >> i think the democrats are going to have to face the fact fee-for-service medicare is something we can no longer afford and it's also a really lousy way of providing medical care. > care. >> one of the reasons the clinton budget in '93 was successful and led to 22 million jobs over the course of the next seven years because it established rationality and predictability. it raised taxes, and it cut spending, half a trillion dollars, peanuts by today's standards. that was very tough to get passed. we had to ram is through at the end begging senator bob kerr weeverything we had and it got condition. what happened is the markets respond, rest of the world looked at us and said they can manage their affairs. what bothers me about what we're about to do is we can't manage our affairs and the public is understandably frustrated and

angry and dispirited by it. >> o'donnell: yet vote everybody back in office for the most part. voted back in the same president and the same republican. >> in an exis ambivalent way i want to talk about stability for my former boss, ronald reagan. he would have tim o'neill, his partisan, fierce opponent of the speaker of the house come in and try to work on the same sort of deals being discussed now, but ronald reagan also had the republican leaders of that same house and that same senate in. he had to mash them all together. he had to make it work. one of the surprising things about president obama in this crisis, i think, is that he walked in as a winner. he just won an election. he had everything going for him, much higher popularity ratings than the congress itself has. the republicans were humiliated. they had no leverage. so you get those republicans

in. you get nancy pelosi in. and you shake it up. you give the republicans something so that they can save face pup make them raise taxes. at the end of the day, nobody's happy. but stability occurs. and the thing goes forward. i am continually surprised by president obama that he lets it become these dreadful enervating dramas. >> could i just say that when ronald reagan was president and everything peggy just said is absolutely true-- >> i'm so glad. ( laughter ). >> when ronald reagan was president, grover norquist was in diapers and rush limbaugh was a disk jockey, i think, in st. louis. you have had a hermetically sealed culture grow up on the right in this country that as we saw during the last election, is removed from reality and is extreme in the most egregious way. >> and you don't have to go all the way-- >> it's much further than that.

when bill clinton passed that budget deal, he didn't get a single republican vote. and there hasn't been a republican vote for tax increases in 20 years, and if the deal falls apart today-- which i think it probably will-- the reason is there will be no republican votes. even in the senate, much less to the house for a tax increase, which is what they're talking about. >> in the short term there's no political penalty to pay for that, back to your point, i guess, that we re-elected both a democratic president and because-- because of jerry manneddering, so there's no political price to pay so members of congress with vote in the interest of the their constituents and not the best center of the country. >> o'donnell: we're going to take a short break and talk about 2013 and what the new emotio administration will look like. we'll be right back. stay with us. then, the united club.

my mother was so wrong about you. next, we get priority boarding on our flight i booked with miles. all because of the card. and me. okay, what's the plan? plan? mm-hmm. we're on vacation. there is no plan. really? [ male announcer ] the united mileageplus explorer card. the mileage card with special perks on united. get it and you're in. >> o'donnell: we are back with our panel. let's talk about 2013. no movement on the fiscal cliff as of yet. and the president said today one of his top priorities in the the new year will be immigration reform. i want to go around the table quickly. can he get something like that done? >> if the fiscal cliff process that he is involved in does not poison his relationship with the republicans in congress, perhaps. but if things get very bad now with the republicans in

congress, maybe not. >> o'donnell: joe? >> i think one of the clearest lessons from the last election was the republicans have to begin to deal with the growing latino community in this country, and that there will be plenty of respects ready to vote for immigration reform. >> o'donnell: and, michael, the president always said today he is going to put his full weight behind some gun measures that would keep guns out of the hands of the mentally ill. can that pass? >> i don't know. one of the most interesting public opinion trends in the last decades is support in america for gun rights and same-sex marriage has increased, about the same rate, about 16 points in about eight years. it's really interesting. >> very libertarian. >> exactly. >> neither democrats or republicans take those tricks there. it's a libertarian streak in the public. that's harder than it was for a few years ago for the president. joe biden is working on a plan and it will take a lot of blocking and tackling and it won't happen in a year. >> i think there is some

possibility of keeping the guns out of the hand of mentally ill is some place you can find a compromise. an assault weapons ban is much harder especially as senator feinstein is going to impose a broader definition of what an assault weapon is. it was hard enough to get that through in '94, when the definition is pretty squirrelly. if you tighten that up, it will be nigh on impossible. >> o'donnell: president obama is going to have a big change in his cabinet, most likely, in 2013. if you look at the big four-- justice department, treasury, defense, and state. all of those are likely leaving at some point in the next year. is that, michael, a concern at all for president obama that there could be that many top people, especially in national security roles-- that are moving on and you'll have new there? >> it's usually disrupting to have to find replacements and in this environment try to get them confirmed. i think some folks are not leaving because it's too disrupting. i think eric holder will stay at justice because it's not a fight

they want to have right new. it's a little unclear what will happen in some of the others. we thought we would have some of the announcements already. he's, obviously, a desire to take some jobs. meas to walk back. so this is a complicated part of what's going on. >> o'donnell: i want to ask you, joe about the defense department of, because you have always covered the pentagon and we have seen senator hagel sort of hanging out there, full, not even being nominated but out there that he's a preference of the president, and you just heard senator coburn say h he could not vote for him. the democrats will vote him him but the republicans will not support a foal republican. >> i think the hagel nomination signifies a much larger fight. most of the opposition is coming from the israel lobby, not to put too fine a point on it. they are upset about statements he's made in the past which i think are fairly moderate, main stream statements but they don't

like it. apac has been out there make phone calls against him. i think if the president gives in on this, it if he nominates hagel and hagel is still a possibility as far as i understand from the white house, if he gives in on this, it's going to empower neoconservatives who have been wrong with everything in foreign policy for the last decade, when it comes to making a deal with iran later in the year, which is a real possibility. they're going to try and block any kind of arrangement that we make in terms of a nuclear deal. >> o'donnell: speak of cabinet changees, we all know hillary clinton is moving on. we've not seen her for three weeks. has anyone heard how she's doing? and what's next for hillary clinton? dee dee? >> you get that question. ( laughter ). >> no, you know, she was very sick with the flu, fell and hilt her head, as we all know, and suffered a concussion, which was pretty serious. and had repercussions for her.

she was really out of-- you know, incapacitated-- not incapacitated that's too strike word-- but she was really suffering from the effects of hitting her head so glad to see he's returning to work on monday-- i guess right after the holiday. it was too bad seeing some in the public taking shots at her. that was cheap under the circumstances. what will she do next? whatever she wants is the answer. she wants to continue work wog behalf of women and girls. she said that is the global civil rights issue of the century. and we'll sit around and wait for however long hillary wants us to wait to see if she wants to run for president. it's something she wants to take her time to think about. >> o'donnell: michael? >> everything she said. i think she'll run. >> she's going to run. >> she's running, she's running. >> will she testify on benghazi? where does that all stand? >> i think she will yeah. >> sure she will. there is no scandal with

benghazi. there is one of the most trumped up, ridiculous exercises that i have ever seen. >> joe, then perhaps she should have come forward some time ago and talked in public about benghazi. >> they were doing-- they were doing a study. they were doing a study within the department, which is pretty conclusive any what happened there. >> and she send all the recommendations? >> >> and she accepted all of the recommendations. what you have here say very angry senator john mccain who was conducting a vendetta against susan rice because of things that she said about him during the 2008 campaign. several of his pals, like lindsey graham? >> ioh, my goodness. >> have joined on top of it. from my knowledge of the state department and having a son who is a foreign service officer who has serve served served in difficult places, this sort of situation could have happened anywhere. >> o'donnell: let's turn now-- this is the last show of 2012. we get to look forward and predictions for 2013. michael, you have a predict for what--

>> this is not going to strike anyone as terribly brave. but chris christie will run for governor. he will win as governor of new jersey? >> iof. >> oh, going on a limb there. >> and he will turn around and start running for president. >> o'donnell: what about cory, we's chances? >> i can't comment-- >> o'donnell: another dee dee? >> we already talked about this a little bit, but my prediction was an assault weapons ban will not pass, even though one of my former boss, senator feinstein, will make a valiant effort as will senator biden but i hope other restrictions on gun ownership, particularly people with mental disabilities will. >> i think one of the-- one of the big stories of the coming year after we get past the anybody stuff we're in right new is will-- will be the sometimes-awkward, sometimes-hecky-jerky, attempt

of the republican party in washington to come to terms with the meaning of the 2012 election, to come to terms with the demographic and cultural changes that have swept the nation they wish to lead. this will evolve over the next few years. it's going to be one of the great things to watch. >> o'donnell: you know that will happen this year? >> i think it will begin this year, or, boy, they're going to be in trouble. >> assad will fall in syria, and when he does, it is going to be a huge mess. it is-- it's-- there's not just going to be another government come in. there's going to be consideration of whether the borders of sirria, lebanon, iraq are the actual borders. whether those straight lines drawn in the sand by europeans 100 years ago are going to stand. this is going to be a huge, violent mess. >> o'donnell: all right, and, joe, what has happened in the last couple of weeks, to bring everybody up to date, makes it

more likely assad will fall in the next probably six months or so? >> i think he's-- he's had serious defections. the rebels, who are predominantly sunni and who are majority of the country, are getting really strong support from other sunnies in the region. and. none of his neighbors like him anymore. >> o'donnell: all right, we will be right back with our "face the nation" flashback.

>> o'donnell: for this week's "face the nation" flashback we thought we would take a look back at some of the more memorable moments from "face the nation" this year. >> how are you, buddy? it's great to see you. >> governor romney is a pretty flexible guy. >> you know, we've been trying for a long time to get mitt romney to come sit down at this table. you're, automobile, a friend and an adviser. you make a good case for him. but i'd like to hear him make the case. would you put in a word for us and say, you know, they'd love to see you over there at "face the nation" if you'd accept

their invitation. >> you bet i will. >> schieffer: where do you think this election is right now? >> i think that the president's winning, and winning in the swing states. >> schieffer: we would love to have governor romney on "face the nation." >> thank you, bob, for having me. >> schieffer: thank you. and what about governor romney? >> o'donnell: would you consider a vice presidential nomination-- >> no. it's something i'm not even considering right now. i'm so focused on my job in congress. >> then we'll talk with vice president hopeful paul ryan. $1 trillion in defense spending and you voted for it. >> no, nor. >> o'donnell: you vote forward that. >> i voted for the budget control act gleft attack takes the life our ambassador there and three other americans. >> we conot have information at present that leads us to conclude this was premeditate or preplanned. >> schieffer: are you saying that the administration deliberately misled the american

people to make it look as if terrorism is-- is not as much of a threat as apparently it is? >> either they are misleading the american people or are incredibly incompetent. >> it is now the worst cover-up or incompetence i have observed in my life. somebody said to me this is as bad as watergate. nobody died in watergate. >> schieffer: when did the two of you realize this was a big story? >> early than you might think. we had found out there was a secret funds that paid for watergate and these other illegal activities about eight weeks after the break-in, and i felt a chill go down my back, and i said to god. this president is going to be impeached." >> schieffer: do you think we're ever going to see him on one of these sunday morning interview shows. i know he does fox, but we'd love to have him. >> the fact is we're going to take our message to the american people. >> just remember, shock tamale and then eat it.

you're going to really like tamales. we caught up with him in lebanon, pennsylvania. governor, thank you so much for joining us today. we really appreciate it. >> o'donnell: and just to show persistent payoff, bob did get the first sunday morning interview with mitt romney. and we will be right back. t=

>> o'donnell: and that's all the time we have for today. bob will be back next week but i'll see you tomorrow on "cbs this morning." happy new year, and thanks for watching. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org